On 13 June, the Federal Reserve in the United States voted to raise interest rates by 0.25%, citing high levels of economic expansion and increased jobs as the reason for the increase. The rate rise was expected and will boost the US central bank’s benchmark level to between 1.75% and 2%, which is the highest rate since 2008.
About US Rate Rises
Federal Reserve officials are already predicting two more rate rises for 2018, which is higher than what was previously anticipated. This marks the seventh time the bank has raised rates since 2015.
This increase is part of the US’s recovery plan and is linked to the recent global financial crisis. It is predicted that growth and inflation will be much stronger than what was suggested in March, and unemployment rates will continue to decline.
The Chair of the Federal Reserve, Jay Powell, commented that the decrease in unemployment is boosting US income and confidence levels. Overseas expansion and tax cuts are also supporting additional growth. He stated: ““The main takeaway is that the economy is doing well.”
Global Impacts of US Interest Rates
The US economy is expected to grow by 2.8% in 2018, with unemployment dropping to 3.6% and core inflation rates rising to around 2%.
Jay Powell noted that trade concerns are being expressed and some businesses are delaying investments and hiring due to uncertainty. However, he added: ““We really don’t see it in the numbers.”
The ripple effect of interest rate increases is that the dollar weakens against all other major currencies.